Question 1

A person who transfers a negotiable instrument to someone else and for consideration warrants:

Accepted Answer

A) that all signatures on the instrument are authentic. 
B) that some signatures on the instrument are authorized. 
C) that the beneficiary cannot recover any amount from the warrantor if the warranty has been breached. 
D) that the warrantor is aware of insolvency proceedings commenced with respect to the maker. 
A) that all signatures on the instrument are authentic. 
B) that some signatures on the instrument are authorized. 
C) that the beneficiary cannot recover any amount from the warrantor if the warranty has been breached. 
D) that the warrantor is aware of insolvency proceedings commenced with respect to the maker. A

Question 2

Peter draws a check on his account in Third National Bank payable to the order of Stella.When Peter draws the check,he gets Third National Bank to certify the check.Stella presents the check to Third National Bank for payment but the bank refuses to honor the check.What is the result?

Accepted Answer

A) Third National Bank becomes primarily or absolutely liable on the check. 
B) Peter is primarily liable on the check and Third National Bank is secondarily liable on the check. 
C) Both Peter and Third National Bank are primarily liable on the check. 
D) Third National Bank has no contractual liability on the check whatsoever. 
A) Third National Bank becomes primarily or absolutely liable on the check. 
B) Peter is primarily liable on the check and Third National Bank is secondarily liable on the check. 
C) Both Peter and Third National Bank are primarily liable on the check. 
D) Third National Bank has no contractual liability on the check whatsoever. A

Question 3

Who is primarily liable on a certified check?

Accepted Answer

A) The payee 
B) The drawer 
C) The certifying drawee bank 
D) No party is primarily liable 
A) The payee 
B) The drawer 
C) The certifying drawee bank 
D) No party is primarily liable C

Question 4

People who presents drafts for warranties:

Accepted Answer

A) do not make a warranty that they have knowledge of the insolvency proceedings commenced regarding the drawer. 
B) make a warranty that the instrument has not been materially altered. 
C) make warranties that are similar to those transferors make. 
D) make a warranty that they are aware of the unauthorized signature of the maker. 
A) do not make a warranty that they have knowledge of the insolvency proceedings commenced regarding the drawer. 
B) make a warranty that the instrument has not been materially altered. 
C) make warranties that are similar to those transferors make. 
D) make a warranty that they are aware of the unauthorized signature of the maker.

Question 5

A person who is primarily liable has agreed to pay the negotiable instrument.

Accepted Answer

A) True 
 B)False

Question 6

Susan borrows $1,000 from Jack and gives him a promissory note for $1,000 at 9 percent annual interest payable in 90 days.Jack indorses the note "Pay to the order of Robin" and negotiates the note to Robin.At the end of 90 days,Robin takes the note to Susan.Under these circumstances:

Accepted Answer

A) if Susan dishonors the note Robin can hold Jack secondarily liable without giving him notice of the dishonor. 
B) if Susan dishonors the note,Robin cannot sue Susan on the basis of her maker's obligation. 
C) if Susan dishonors the note,Robin cannot hold Jack secondarily secondarily liable on his indorsement. 
D) if Susan pays Robin the $1,000 and accrued interest,she can have Robin mark it "paid" and give it back to her. 
A) if Susan dishonors the note Robin can hold Jack secondarily liable without giving him notice of the dishonor. 
B) if Susan dishonors the note,Robin cannot sue Susan on the basis of her maker's obligation. 
C) if Susan dishonors the note,Robin cannot hold Jack secondarily secondarily liable on his indorsement. 
D) if Susan pays Robin the $1,000 and accrued interest,she can have Robin mark it "paid" and give it back to her.

Question 7

What are the most common ways that an obligor on a negotiable instrument is discharged from his/her liability?

Accepted Answer

The most common ways that an obligor on

Question 8

Ted stole Ron's checkbook and wrote a check for $100,forging Ron's signature.Under these circumstances:

Accepted Answer

A) Ted but not Ron is liable on the check. 
B) Ron but not Ted is liable on the check. 
C) both Ted and Ron are liable on the check. 
D) the bank will be liable on the check. 
A) Ted but not Ron is liable on the check. 
B) Ron but not Ted is liable on the check. 
C) both Ted and Ron are liable on the check. 
D) the bank will be liable on the check.

Question 9

A material change in a negotiable instrument does not discharge any party whose contract is changed.

Accepted Answer

A) True 
 B)False

Question 10

Who is primarily liable on a check when it is issued?

Accepted Answer

A) The payee is primarily liable 
B) The drawer is primarily liable 
C) The drawee bank is primarily liable 
D) No party is primarily liable 
A) The payee is primarily liable 
B) The drawer is primarily liable 
C) The drawee bank is primarily liable 
D) No party is primarily liable

Question 11

The acceptor's obligation:

Accepted Answer

A) extends to a person entitled to enforce the draft. 
B) does not extend to the drawer. 
C) extends only to an indorser who paid the instrument pursuant to the indorser's liability. 
D) extends to the drawer,but not the indorser who paid the instrument. 
A) extends to a person entitled to enforce the draft. 
B) does not extend to the drawer. 
C) extends only to an indorser who paid the instrument pursuant to the indorser's liability. 
D) extends to the drawer,but not the indorser who paid the instrument.

Question 12

An indorsing transferor makes all five transfer warranties to his/her immediate transferee.

Accepted Answer

A) True 
 B)False

Question 13

Warranties do not depend on presentment,dishonor,and notice,but may be utilized before presentment has been made.

Accepted Answer

A) True 
 B)False

Question 14

With respect to instruments,"responsibility" means the authority:

Accepted Answer

A) to access instruments in incoming or outgoing mails. 
B) to process instruments for issue in the name of fictitious payees. 
C) to prepare or process instruments for issue in the name of the employer. 
D) to have access to instruments in storage. 
A) to access instruments in incoming or outgoing mails. 
B) to process instruments for issue in the name of fictitious payees. 
C) to prepare or process instruments for issue in the name of the employer. 
D) to have access to instruments in storage.

Question 15

Liability on negotiable instruments flows from:

Accepted Answer

A) proper payment of the instrument. 
B) signatures on the instruments. 
C) non-presentment of an instrument. 
D) writing "without recourse" on the instrument. 
A) proper payment of the instrument. 
B) signatures on the instruments. 
C) non-presentment of an instrument. 
D) writing "without recourse" on the instrument.

Question 16

Larry signed a note to the Bank,and his friend Moe also signed the note as an accommodation maker.If Larry defaults on the note when it is due,what are Moe's rights and obligations?

Accepted Answer

A) Moe has the right to recover his payment from the bank. 
B) Moe has the same contractual liability as Larry and must pay the bank. 
C) Moe cannot recover his money from Larry or the bank since he has primary liability. 
D) Moe has secondary liability. 
A) Moe has the right to recover his payment from the bank. 
B) Moe has the same contractual liability as Larry and must pay the bank. 
C) Moe cannot recover his money from Larry or the bank since he has primary liability. 
D) Moe has secondary liability.

Question 17

Under the Revised Article 3 rules for beneficiaries,in the event of a breach of transfer warranty:

Accepted Answer

A) the damages recoverable will be less than the amount of the instrument. 
B) the damages recoverable may not be more than the amount of the instrument plus expenses and loss of interest incurred as a result of the breach. 
C) a beneficiary of the transfer warranties who took the instrument in good faith may not recover form the warrantor an amount equal to the loss suffered as a result of the breach. 
D) no damages may be recovered. 
A) the damages recoverable will be less than the amount of the instrument. 
B) the damages recoverable may not be more than the amount of the instrument plus expenses and loss of interest incurred as a result of the breach. 
C) a beneficiary of the transfer warranties who took the instrument in good faith may not recover form the warrantor an amount equal to the loss suffered as a result of the breach. 
D) no damages may be recovered.

Question 18

Tim stole from Wes a check payable to the order of Wes.Tim forged Wes's signature and presented the check for payment at American Bank,which honored the check.If Wes sues American Bank for the amount of the check,under what theory,if any,can Wes recover the funds from the Bank?

Accepted Answer

A) Conversion 
B) Fraud 
C) Unfair and deceptive practices 
D) Fictitious payee rule 
A) Conversion 
B) Fraud 
C) Unfair and deceptive practices 
D) Fictitious payee rule

Question 19

A nonindorsing transferor makes all five transfer warranties to his/her immediate transferee.

Accepted Answer

A) True 
 B)False

Question 20

Who is entitled to enforce an instrument?

Accepted Answer

1)The holder of the instrument; 2)A nonh

Exam 40: Liability of Parties

A person who transfers a negotiable instrument to someone else and for consideration warrants:

Peter draws a check on his account in Third National Bank payable to the order of Stella.When Peter draws the check,he gets Third National Bank to certify the check.Stella presents the check to Third National Bank for payment but the bank refuses to honor the check.What is the result?

Who is primarily liable on a certified check?

People who presents drafts for warranties:

A person who is primarily liable has agreed to pay the negotiable instrument.

Susan borrows $1,000 from Jack and gives him a promissory note for $1,000 at 9 percent annual interest payable in 90 days.Jack indorses the note "Pay to the order of Robin" and negotiates the note to Robin.At the end of 90 days,Robin takes the note to Susan.Under these circumstances:

What are the most common ways that an obligor on a negotiable instrument is discharged from his/her liability?

Ted stole Ron's checkbook and wrote a check for $100,forging Ron's signature.Under these circumstances:

A material change in a negotiable instrument does not discharge any party whose contract is changed.

Who is primarily liable on a check when it is issued?

The acceptor's obligation:

An indorsing transferor makes all five transfer warranties to his/her immediate transferee.

Warranties do not depend on presentment,dishonor,and notice,but may be utilized before presentment has been made.

With respect to instruments,"responsibility" means the authority:

Liability on negotiable instruments flows from:

Larry signed a note to the Bank,and his friend Moe also signed the note as an accommodation maker.If Larry defaults on the note when it is due,what are Moe's rights and obligations?

Under the Revised Article 3 rules for beneficiaries,in the event of a breach of transfer warranty:

Tim stole from Wes a check payable to the order of Wes.Tim forged Wes's signature and presented the check for payment at American Bank,which honored the check.If Wes sues American Bank for the amount of the check,under what theory,if any,can Wes recover the funds from the Bank?

A nonindorsing transferor makes all five transfer warranties to his/her immediate transferee.

Who is entitled to enforce an instrument?

Law, Legal Reasoning, and the Legal Profession

Dispute Settlement

Business Ethics and Corporate Social Responsibility

Business and the Constitution

Crimes

Intentional Torts

Negligence and Strict Liability

Licensing and Intellectual Property

The Nature and Origins of Contracts

Creating a Contract: Offers

Creating a Contract: Acceptances

Consideration

Capacity to Contract

Voluntary Consent

Illegality

The Form and Meaning of Contracts

Third Parties Contract Rights

Performance and Remedies

Formation and Terms of Sales Contracts

Warranties and Product Liability

Performance of Sales Contracts

Remedies for Breach of Sales Contracts

The Agency Relationship-Creation, Duties, and Termination

Liability of Principals and Agents to Third Parties

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Which Form of Business Organization

Partnerships

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Management of the Corporate Business

Financing the Corporation and the Role of the Shareholders

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Legal Liability of Accountants

Personal Property and Bailments

Real Property

Landlord and Tenant

Estates and Trusts

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Negotiable Instruments

Negotiation and Holder in Due Course

Checks and Electronic Fund Transfers

Introduction to Security

Security Interests in Personal Property

Bankruptcy

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